How to Choose a Charity to Donate to Wisely

You have the money set aside. You have a cause in mind. What you do not have is a way to tell whether the money helps and whether the charity asking for it is any good.

Most websites with information about donating answer that question by handing you a score. A letter grade, a star rating, or a number out of 100, produced by a watchdog using a methodology you cannot see and applied only to the charities that watchdogs happened to rate. If the nonprofit you are considering is not on their list, you are back to where you started.

There is a better way, and it doesn’t require trusting anyone’s shorthand. You can check trustworthy charities on four things:

1. Who is watching the money,
2. How healthy the finances are,
3. How open the charity is about both, and
4. Whether the charity can show real results for the people it serves.

Learning how to choose a charity to support means learning to check those four things yourself, for any organization, using free public data any donor can access.

Here is the whole process, in about thirty minutes.

Run it once, and you have a habit you can apply to every charity you support from here on.

What Actually Makes a Charity Trustworthy

Four pillars carry almost all the weight when you are comparing charities and deciding where your money does the best:

• Governance. Is there a real board doing real oversight?
• Financial health. Does the money coming in and going out make sense for the work?
• Transparency. Can you see both of those without asking permission?
• Outcomes. Can the charity show what changed in people’s lives, not just what it did?

Governance is the pillar most donors skip when comparing charities, and it is the one that catches the most problems.

The BBB Wise Giving Alliance evaluates charities against 20 Standards for Charity Accountability, organized around governance and oversight, results reporting, finances, and truthful communications. A charity meeting all twenty earns accreditation. It’s worth knowing, however, that compliance is voluntary and not legally required, so charities that have not been accredited are not automatically suspect. Many simply never applied.

The governance standards specify what a board must do. Formally review the chief executive’s performance. Approve the budget. Maintain a written conflict-of-interest policy. None of that is ceremonial. A board doing none of it is a board that will not catch a problem before your donation does.

The transparency aspect you can check in about a minute. Every 501(c)(3) can be looked up for current tax-exempt status, filing history, and whether your gift is actually tax-deductible, free, through the IRS Tax Exempt Organization Search. If a charity is not there, that is the end of the conversation until someone explains why.

Start here: pick the charity you are closest to giving to right now and look it up in the IRS search before you read further. Ninety seconds, and it tells you whether the rest of this is even worth your time on that group.

The other two pillars, financial health and outcomes, take a little longer and separate good charities from plausible ones. They are the rest of this guide, and together the four give you a repeatable way of comparing charitable organizations rather than trusting one score.

The Overhead Ratio Myth

You have probably heard that good charities keep overhead low. It is the most repeated piece of giving advice there is, and it is the one most likely to lead donors wrong when they are choosing between charities.

In 2013, three of the largest evaluators of charitable organizations, GuideStar, Charity Navigator and the BBB Wise Giving Alliance, jointly launched a campaign called the Overhead Myth. Their argument was that judging charities mainly by their overhead percentage “can do more damage than good”, because what gets counted as overhead includes staff training, long-term planning, evaluation, and the fundraising capacity that brings in next year’s fund. Starve those and you get a group that looks efficient on paper and cannot do its job.

Not everyone agreed. CharityWatch, a separate independent watchdog, argued the opposite in a piece titled “Overhead Ratios Are Essential for Informed Giving,” published June 2, 2014. Their position is that the ratio remains a meaningful signal, and that dismissing it hands nonprofits an excuse.

So the credentialed evaluators disagree with each other. That is genuinely useful to know, because it tells you the honest answer is not a rule of thumb.

It also tells you something about how giving advice spreads. The overhead rule survives because it is easy to repeat, not because the money behaves that way. Charities that spend nothing on fundraising raise less, which means less support reaching programs the following year. Donors who insist on a low ratio often get exactly what they asked for and less of what they wanted.

The practical synthesis: a single overhead percentage tells you almost nothing on its own. Two charities with the same number can be in opposite shape, and only the underlying data tells you which is which. One at 30% because it is building an evaluation function and is healthier than one at 12% because it has not invested in its programs for a decade. Ask why the number is what it is, and how it has trended across three or four years of data, before you use it to rule a charity in or out.

How to Read a Charity’s Form 990 Without a CPA

You do not need an accountant for this. You need ten minutes and a browser.

Charities above a certain size file a Form 990 with the IRS each year, and that filing is the single richest source of data a donor has. Once a nonprofit crosses $200,000 in gross receipts or holds $500,000 in total assets, it files the full return rather than the simplified e-Postcard, and that full return is what makes detailed expense data public in the first place. It is a public document. You are entitled to read it.

The fastest way in is ProPublica’s Nonprofit Explorer, which publishes those filings as searchable, human-readable web pages rather than scanned PDFs. You can search charities and other nonprofits by name, by an officer’s name, or by the full text of the filing itself.

Three steps:

1. Search the charity’s name or EIN.
2. Open the most recent Form 990.
3. Check three numbers: total revenue, total expenses, and how much of those expenses went to compensation versus program activity.

Here is the method applied to a real charity. This is a worked example of how to read a filing, not a recommendation about where to send your donation. ACE Scholarships, EIN 84-1531066, reported $75,419,889 in total revenue and $70,423,424 in total expenses for its fiscal year ending June 2025. Contributions made up about 93% of revenue, and executive compensation came to roughly 2.3% of total expenses.

Now read those numbers the way you would read them for any of the charities on your list. Revenue and expenses sit close together, which means the money raised is being spent on the work rather than accumulating. Contributions at 93% tells you this group depends almost entirely on donors, which is a real risk worth naming, not a flaw. Compensation at 2.3% of expenses tells you the fund is going somewhere other than salaries. None of that makes a charity the right choice for you. It tells you the numbers hang together and nothing is hiding.

Do this now: open Nonprofit Explorer in another tab and run the same three checks on the charities you are actually considering. Ten minutes on public data tells you more than any score, because you are reading the organizations’ own filed numbers rather than someone’s summary of them.

One thing the 990 will not tell you: whether the charity is currently in good standing and eligible to receive tax-deductible donations. That is a separate question with a separate answer, and it is the IRS search from the first section. Do both.

Measuring Outcomes, Not Just Intentions

An output is what a charity did. An outcome is what changed in people’s lives because of it. Almost every disappointing donation comes down to a donor accepting the first when the charity promised the second.

“We served 40,000 meals” is an output. It counts activity, and the charity controls it entirely. “Food insecurity in the communities we support fell measurably over three years” is an outcome. It is a claim about the world; it can be wrong, and it is much harder to say out loud.

That difficulty is exactly why it matters. Charities willing to make outcome claims are the charities that have decided to be measured, and most nonprofits quietly decline. When you are choosing between two organizations that look similar, this is often the only thing that separates them.

GiveWell, an independent evaluator, builds its recommendations around cost-effectiveness: how much measurable impact a program produces per dollar spent, tested against independent research and randomized controlled trials rather than a nonprofit’s own account of itself.

What is instructive is how GiveWell handles its own data. It describes its cost-effectiveness estimates as “extremely rough” and refuses to rely on them alone, weighing each one against a charity’s track record, particularly when two options look similar on paper. The most rigorous evaluator in the field treats its own headline number as one input among several.

That is the posture to borrow. When charities show you an impact figure, ask three things. What was measured. Who measured it. What it is being compared against. A number with good answers to all three is worth something. A number with none of them is a mission statement wearing a percentage sign.

A Simple Due-Diligence Checklist Before You Give

Everything above collapses into five actions, and you can complete all of them for free in under thirty minutes using two public tools.

1. Confirm the charity exists and your gift is tax-deductible. IRS Tax Exempt Organization Search. Two minutes.
2. Pull the most recent Form 990. ProPublica Nonprofit Explorer. Check total revenue, total expenses, and compensation as a share of expenses.
3. Put overhead in context. Look at the trend across several years of data and the reason behind the number, never the number alone.
4. Ask for one outcome, not an output. What changed in people’s lives, who measured it, and compared to what.
5. Check governance if the donation is significant. The BBB standards give you the questions: does the board review the chief executive, approve the budget, and keep a written conflict-of-interest policy?

Two of the four pillars, board oversight and program effectiveness, cannot be settled from public filings alone. That is where credentialed methods earn their keep. The BBB Wise Giving Alliance’s governance standards and GiveWell’s outcomes-over-anecdotes research are two independent, serious answers to the questions a Form 990 cannot reach.

Choosing a charity to donate to is not about finding the one group with the best score. It is about asking better questions of the charities in front of you, including the organizations you already support with your giving.

If the donation is large enough to affect your tax position, talk to your CPA before you send it. If it is not, run the checklist and give with confidence.

Your next step: take the charity at the top of your giving list and spend thirty minutes on it today. Confirm its status, pull its 990, and email the organization one question about outcomes. Charities that answer that question well have earned your continued support and your next donation. The ones that cannot are worth knowing about before your money moves, not after.

FAQs: Choosing a Charitable Organization

What is the fastest way to check if a charity is legitimate?

The IRS Tax Exempt Organization Search. It confirms current tax-exempt status, filing history, and whether charitable donations to that group are deductible, in about two minutes and at no cost. If a charity does not appear, stop and find out why before giving.

Is a low overhead ratio a sign of a good charity?

Not on its own. Overhead includes training, planning, evaluation, and fundraising capacity, all of which healthy nonprofits need. Three major evaluators campaigned against overhead-first judgment, while CharityWatch has argued the ratio still matters. Look at the trend across several years of data and the reason behind the number, not the number by itself.

Do I need an accountant to read a Form 990?

No. ProPublica’s Nonprofit Explorer publishes filings as readable web pages. Search the charity’s name or EIN, open the most recent filing, and check three numbers: total revenue, total expenses, and compensation as a share of expenses.

What is the difference between an output and an outcome?

An output counts activity, such as meals served or students enrolled. An outcome describes what changed in people’s lives as a result, measured over time and compared against something. Nonprofits report outputs far more often because outcomes are harder to prove, which is precisely why an outcome claim carries more weight.

How much of my donation should reach the programs?

There is no single correct percentage, and any source giving donors one number across all charities is oversimplifying. Read the Form 990 for how the fund is distributed across programs and support costs, then judge it against what the work actually requires. A research charity and a food bank should not have the same shape.

Are charitable donations always tax deductible?

No. Deductibility depends on the charity’s current status with the IRS and on your own tax situation, and it varies between charities. Confirm the group’s eligibility in the IRS search, keep your receipt, and talk to your CPA if the donation is significant.